<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file number 0-15190
OSI Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3159796
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Charles Lindbergh Boulevard, Uniondale, New York 11553
(Address of principal executive offices) (Zip Code)
516-222-0023
(Registrant's telephone number, including area code)
________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
At April 30, 1999 the registrant had outstanding 21,369,609 shares of common
stock, $.01 par value.
<PAGE> 2
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONTENTS
PART I. FINANCIAL INFORMATION..................................................1
Item 1. Financial Statements...............................................1
Consolidated Balance Sheets
- March 31,1999 and September 30, 1998.............................1
Consolidated Statements of Operations
-Three months ended March 31, 1999 and 1998........................2
Consolidated Statements of Operations
-Six months ended March 31, 1999 and 1998..........................3
Consolidated Statements of Cash Flows
-Six months ended March 31, 1999 and 1998..........................4
Notes to Consolidated Financial Statements.........................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk........12
PART II. OTHER INFORMATION.................................................13
Item 1. Legal Proceedings.................................................13
Item 2. Changes in Securities.............................................13
Item 3. Defaults Upon Senior Securities...................................13
Item 4. Submission of Matters to a Vote of Security Holders...............13
Item 5. Other Information.................................................14
Item 6. Exhibits and Reports on Form 8-K..................................14
SIGNATURES....................................................................16
EXHIBIT INDEX.................................................................17
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
Assets 1999 1998
------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,681,174 $ 11,315,166
Short-term investments 8,169,031 13,103,115
Receivables, including trade receivables of
$249,878 and $258,905 at March 31, 1999
and September 30, 1998, respectively 2,696,153 1,720,737
Interest receivable 158,245 283,908
Grants receivable 355,086 406,149
Prepaid expenses and other 741,609 788,496
------------- -------------
Total current assets 24,801,298 27,617,571
------------- -------------
Property, equipment and leasehold improvements - net 7,439,654 7,996,555
Compound library assets - net 4,640,697 5,515,517
Loans to officers and employees 6,433 6,433
Other assets 1,533,933 1,557,903
Intangible assets - net 6,993,631 7,724,001
------------- -------------
$ 45,415,646 $ 50,417,980
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 2,937,300 $ 4,232,540
Unearned revenue 769,315 1,116,685
------------- -------------
Total current liabilities 3,706,615 5,349,225
------------- -------------
Other liabilities:
Loans payable 11,576 49,326
Deferred acquisition costs 690,977 670,916
Accrued postretirement benefits cost 1,409,267 1,289,267
------------- -------------
Total liabilities 5,818,435 7,358,734
------------- -------------
Stockholders' equity:
Common stock, $.01 par value; 50,000,000 shares
authorized; 22,324,242 and 22,288,583 issued
at March 31, 1999 and September 30, 1998,
respectively 223,242 222,886
Additional paid-in capital 105,083,816 104,963,082
Accumulated deficit (59,156,786) (55,842,181)
Accumulated other comprehensive (loss) income (268,195) 325
Less: treasury stock, at cost; 897,838 shares at
March 31, 1999 and September 30, 1998 (6,284,866) (6,284,866)
------------- -------------
Total stockholders' equity 39,597,211 43,059,246
------------- -------------
Commitments and contingencies
$ 45,415,646 $ 50,417,980
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Collaborative program revenues,
principally from related parties $ 4,048,406 $ 3,935,450
Other research revenue 278,439 259,376
License revenue 2,000,000 --
Sales 287,467 235,299
------------ ------------
6,614,312 4,430,125
------------ ------------
Expenses:
Research and development 4,910,772 4,156,141
Production and service costs 485,742 188,794
Selling, general and administrative 2,179,432 2,126,246
Amortization of intangibles 365,185 365,185
------------ ------------
7,941,131 6,836,366
------------ ------------
Loss from operations (1,326,819) (2,406,241)
Other income (expense):
Net investment income 215,348 385,370
Other expense - net (10,969) (62,985)
------------ ------------
Net loss $ (1,122,440) $ (2,083,856)
============ ============
Weighted average number of shares
of common stock outstanding 21,420,332 21,369,283
============ ============
Basic and diluted loss per weighted
average share of common stock
outstanding $ (.05) $ (.10)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Collaborative program revenues,
principally from related parties $ 8,040,684 $ 7,442,876
Other research revenue 579,354 739,808
License revenue 2,050,000 --
Sales 598,417 434,064
------------ ------------
11,268,455 8,616,748
------------ ------------
Expenses:
Research and development 9,388,872 8,560,120
Production and service costs 851,150 401,425
Selling, general and administrative 4,026,601 4,099,004
Amortization of intangibles 730,370 730,370
------------ ------------
14,996,993 13,790,919
------------ ------------
Loss from operations (3,728,538) (5,174,171)
Other income (expense):
Net investment income 446,666 786,607
Other expense - net (32,733) (165,023)
------------ ------------
Net loss $ (3,314,605) $ (4,552,587)
============ ============
Weighted average number of shares
of common stock outstanding 21,411,174 21,367,936
============ ============
Basic and diluted loss per weighted
average share of common stock
outstanding $ (.15) $ (.21)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,314,605) $ (4,552,587)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 978,872 912,784
Amortization of library assets 874,820 901,478
Amortization of intangibles 730,370 730,370
Amortization of deferred acquisition costs 20,061 20,060
Changes in assets and liabilities:
Receivables (985,351) (216,216)
Interest receivable 125,663 227,509
Grants receivable 51,063 (80,128)
Prepaid expenses and other 37,298 (100,384)
Other assets 23,970 (402,682)
Accounts payable and accrued expenses (1,269,248) (1,386,244)
Unearned revenue (346,497) 780,483
Accrued postretirement benefits cost 120,000 100,696
------------ ------------
Net cash used in operating activities (2,953,584) (3,064,861)
------------ ------------
Cash flows from investing activities:
Additions to short-term investments (7,289,636) (3,580,855)
Maturities and sales of short-term investments 12,122,970 7,648,490
Additions to library assets -- (304,538)
Additions to property, equipment
and leasehold improvements (545,113) (941,959)
------------ ------------
Net cash provided by investing activities 4,288,221 2,821,138
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options
and employee stock purchase plan 121,090 41,255
Net change in loans payable (35,905) (44,267)
------------ ------------
Net cash provided by (used in) financing activities 85,185 (3,012)
------------ ------------
Net increase (decrease) in cash and cash equivalents 1,419,822 (246,735)
Effect of exchange rate changes on cash and cash equivalents (53,814) 58,542
Cash and cash equivalents at beginning of period 11,315,166 8,636,634
------------ ------------
Cash and cash equivalents at end of period $ 12,681,174 $ 8,448,441
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of OSI
Pharmaceuticals, Inc. and its subsidiaries (the "Company") as of March 31, 1999
and September 30, 1998, its results of operations for the three and six months
ended March 31, 1999 and 1998 and its cash flows for the six months ended March
31, 1999 and 1998. Certain reclassifications have been made to the prior period
consolidated financial statements to conform them to the current presentation.
It is recommended that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto in the
Company's annual report on Form 10-K for the fiscal year ended September 30,
1998.
Results for interim periods are not necessarily indicative of results for the
entire year.
Net loss per share of common stock outstanding is based on the weighted average
number of shares outstanding. Common share equivalents (stock options) are not
included in the computations for the three and six months ended March 31, 1999
and 1998 since their inclusion would be anti-dilutive.
(2) Comprehensive Income (Loss)
In October 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of SFAS 130 had no impact on the Company's net loss or
total stockholders' equity. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities (referred to as short-term investments
on the accompanying consolidated balance sheets) and foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income (loss).
Components of comprehensive loss for the three and six months ended March 31,
1999 and 1998 are as follows:
5
<PAGE> 8
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended
March 31, March 31,
1999 1998
----------- -----------
<S> <C> <C>
Net loss $(1,122,440) $(2,083,856)
Other comprehensive income (loss):
Foreign currency translation adjustments (86,378) 24,489
Unrealized holding gains (losses) arising
during period (67,090) 11,300
----------- -----------
(153,468) 35,789
Total comprehensive loss $(1,275,908) $(2,048,067)
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the six months ended
March 31, March 31,
1999 1998
----------- -----------
<S> <C> <C>
Net loss $(3,314,605) $(4,552,587)
Other comprehensive income (loss):
Foreign currency translation adjustments (167,770) 58,542
Unrealized holding gains (losses) arising
during period (100,750) 25,100
----------- -----------
(268,520) 83,642
Total comprehensive loss $(3,583,125) $(4,468,945)
=========== ===========
</TABLE>
The components of accumulated other comprehensive income (loss) are as follows:
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
----------- -----------
<S> <C> <C>
Cumulative foreign currency translation $ (186,525) $ (18,755)
Unrealized gain (loss) on short-term investments (81,670) 19,080
----------- -----------
Accumulated other comprehensive income (loss) $ (268,195) $ 325
=========== ===========
</TABLE>
6
<PAGE> 9
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(3) License Agreement Replacing Co-Venture with BioChem Pharma, Inc.
Pursuant to an Agreement (the "New Agreement"), dated March 19, 1999, the
Company and BioChem Pharma, Inc. (formerly BioChem Pharma International, Inc.)
("BioChem") amended their Collaborative Research, Development and
Commercialization Agreement, effective as of May 1, 1996, terminating certain
provisions contained therein, including, without limitation, provisions
establishing the research program. Under the New Agreement, BioChem received
from the Company a worldwide, irrevocable, exclusive license, and right to grant
sublicenses, in certain anti-viral targets for a license fee of $2 million. In
addition, each party will be free to independently pursue the discovery of new
compounds in the Hepatitis B and HIV areas without incurring any responsibility
to the other party. To the extent BioChem completes any clinical trials or
pursues any regulatory approvals for any products, however, it will pay
milestones to the Company. In additional, to the extent BioChem commercializes
certain compounds arising out of the joint venture, it will pay royalties to the
Company.
(4) Changes in Securities
On January 6, 1999, the Board of Directors of the Company adopted, subject to
stockholder approval, certain amendments to the Company's Certificate of
Incorporation. At the Annual Meeting of Stockholders held on March 24, 1999,
the amendments were approved. The Certificate of Incorporation amendments (1)
authorize 5,000,000 shares of preferred stock, par value $.01 per share, with
such designations, preferences, privileges and restrictions as may be
determined from time to time by the Company's Board of Directors (see Article
IV of the Certificate of Incorporation, as amended), and (2) require that all
actions taken by stockholders must be taken at an annual or special meeting and
may not be taken by written consent (see Article VII of the Certificate of
Incorporation, as amended). The full text of the Certificate of Incorporation,
as amended, which is effective as of April 13, 1999, is filed herewith and
incorporated herein by reference.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE AND SIX MONTHS ENDED MARCH 31, 1999 AND 1998
OSI Pharmaceuticals, Inc. (the "Company") is committed to the discovery and
development of novel, small-molecule pharmaceutical products for
commercialization by the pharmaceutical industry. The Company is exploiting its
full range of discovery and development capabilities by building and sustaining
a pipeline of pharmaceutical product opportunities in selected disease areas.
REVENUES
Revenues for the three and six months ended March 31, 1999 were approximately
$6.6 million and $11.3 million, respectively, representing an increase of $2.2
million or 49% and an increase of $2.7 million or 31%, respectively, compared to
revenues of $4.4 million and $8.6 million reported for the three and six months
ended March 31, 1998, respectively. Collaborative research and development
agreements with Pfizer Inc. ("Pfizer"), Anaderm Research Corp. ("Anaderm"),
Hoechst Marion Roussel, Inc. ("HMRI"), Sankyo Company Ltd., Bayer Corporation,
Fujirebio, Inc., and Helicon Therapeutics, Inc. ("Helicon") accounted for
substantially all of the Company's collaborative program revenues for the three
and six-month periods ended March 31, 1999 and 1998. Total collaborative
revenues of $4.0 million and $8.0 million for the three and six-month periods
increased approximately $113,000 and $598,000, respectively. The three-month
increase was principally due to increased funding from Pfizer and Anaderm for
the discovery and development of novel cosmeceutical compounds. The six-month
increase was primarily due to the expansion of the Anaderm program, as well as
increased funding for the program with Helicon. The increase in revenues was
partially offset by the conclusion in September 1998 of one of the Company's
funded collaborative programs with HMRI relating to the discovery and
development of orally active drugs for the treatment of chronic anemia.
Other research revenues, representing primarily government grants and other
research grants, increased by $19,000, and decreased by $160,000, for the three
and six-month periods ended March 31, 1999, respectively. The changes were due
to timing and awarding of grant funding. License revenues of $2,000,000, in the
second quarter of fiscal 1999, were recorded pursuant to a license agreement
entered into in March 1999 with BioChem Pharma Inc., which replaces an earlier
co-venture program, focused on anti-viral drug discovery. For further
information regarding this agreement see Note 3 to the Consolidated Financial
Statements. Sales revenues derived from the pharmaceutic services of the
Company's Aston Molecules Ltd. ("Aston") subsidiary and from diagnostic sales of
the Company's Oncogene Science Diagnostics Inc. ("OSDI"), subsidiary, increased
by $52,000 and $164,000 for the three and six-month periods ended March 31,
1999.
8
<PAGE> 11
EXPENSES
The Company's operating expenses increased by approximately $1.1 and $1.2
million or 16% and 9%, respectively, for the three and six months ended March
31, 1999 compared to the three and six months ended March 31, 1998. Research and
development spending for the current three and six-month periods increased
$755,000 and $829,000, respectively, from the prior year periods generally due
to costs associated with increasing average staff levels and increasing expenses
related to: (1) the continued expansion in the discovery and development of
novel cosmeceutical compounds; (2) the joint venture with Helicon for the
discovery of novel drugs for the treatment of long-term memory disorders; (3)
certain other of the Company's proprietary programs; and (4) the expansion of
the Company's medicinal chemistry operations at its Aston subsidiary.
The Company's production and service costs increased by approximately $297,000
and $450,000 for the three and six-month periods ended March 31, 1999,
respectively. The increase was primarily related to costs associated with OSDI
as it expands its manufacturing capacity. Selling, general and administrative
costs for the current three and six-month periods ended March 31, 1999 increased
by $53,000 and decreased by $72,000, respectively, from the prior year periods.
OTHER INCOME AND EXPENSE
Investment income decreased approximately $170,000 and $340,000 or 44% and 43%,
respectively, for the three and six months ended March 31, 1999 compared to the
three and six months ended March 31, 1998. This decrease relates to the decrease
in the principal balance of cash invested.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, working capital (representing primarily cash, cash
equivalents and short-term investments) aggregated approximately $21.1 million.
The Company is dependent upon collaborative research revenues, government
research grants, interest income and cash balances, and will remain so until
products developed from its technology are successfully commercialized. The
Company believes that with the funding from its collaborative research programs,
government research grants, interest income, and cash balances, its financial
resources are adequate for its operations for approximately the next three to
four years based on its current business plan even if no milestone payments or
royalties are received during this period. However, the Company's capital
requirements may vary as a result of a number of factors, including, but not
limited to, competitive and technological developments, funds required for
further expansion or enhancement of the Company's technology platform (including
possible additional collaborations, acquisitions and joint ventures), potential
milestone payments, and the time and expense required to obtain governmental
approval of products, some of which factors are beyond the Company's control.
9
<PAGE> 12
One of the Company's strategic objectives is to manage its financial resources
and the growth of its drug discovery and development programs so as to balance
its proprietary investments with its funded collaborations. There can be no
assurance that scheduled payments will be made by third parties, that current
agreements will not be canceled, that government research grants will continue
to be received at current levels, that milestone payments will be made, or that
unanticipated events requiring the expenditure of funds will not occur. Further,
there can be no assurance that the Company will be able to obtain any additional
required funds on acceptable terms, if at all. Failure to obtain additional
funds when required would have a material adverse effect on the Company's
business, financial condition and results of operations.
YEAR 2000 COMPLIANCE
The Company is aware of the challenges associated with the inability of certain
systems to properly format information after December 31, 1999 (the "Year 2000
problem"). The Year 2000 problem is the result of computer programs being
written using two digits (rather than four) to define an applicable year. The
Company is currently working to resolve the potential impact of the Year 2000
problem on the processing of date-sensitive information by the Company's
computerized information systems. Substantially all of the Company's biology and
chemistry databases are stored on Oracle tables and ISIS chemical structure
databases, which are Year 2000 compliant, as are its Novell network servers. The
Company has essentially completed the conversion of its financial records to an
Oracle based system which is Year 2000 compliant. The Company does not
anticipate any material disruption in its operations as the result of any
failure of its internal Year 2000 compliance. Through the current period, the
Company has not incurred any significant costs in addressing the Year 2000
problem. Based on current information, any additional costs of addressing
remaining potential Year 2000 problems associated with the Company's internal
systems and operations are not expected to have a material adverse impact to the
Company's financial position, results of operations, or cash flows in future
periods.
The Company is in the process of conducting an evaluation of the extent to which
the operations of the material third parties with whom it regularly deals may be
disrupted by any Year 2000 noncompliance of any of their systems. These third
parties include the Company's collaborative partners and its suppliers and
vendors. Disruption of the operations of any of its partners could delay or halt
important research and development programs, cause the loss of data, or have
other unforeseen consequences. The Company is currently contacting all
significant collaborators, suppliers, vendors and financial institutions in
order to identify potential areas of concern. It is anticipated that this
inquiry will be completed during the third quarter of fiscal 1999. Year 2000
problems experienced by the Company's suppliers and vendors could cause a
disruption of the Company's operations. The Company currently is unable to
estimate the likelihood of any of these risks being realized, or if realized,
the impact they may have on the Company. Any such occurrence could have a
material adverse effect on the Company's business, financial condition and
results of operations.
If necessary, the Company intends to create a remediation and contingency plan
to identify and document potential business disruptions and continuity planning
procedures. The focus of this
10
<PAGE> 13
activity would be on potential failures of external systems required to carry
out normal business operations including services provided by the public
infrastructure such as, but not limited to, power, electric, transportation and
telecommunications. The Company expects this activity to be an on-going process
throughout fiscal 1999.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which is effective for all quarters of
fiscal year beginning after June 15, 1999. SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In
accordance with SFAS 133, an entity is required to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gain and losses to offset related results on the hedged
item in the income statement and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company does not believe that the implementation of SFAS 133
will have a material effect on its results of operations and financial position.
FORWARD LOOKING STATEMENTS
Certain of the matters and subject areas discussed in this report that are not
statements of current or historical fact are "forward-looking statements" that
convey information about potential future circumstances and developments. These
forward-looking statements are necessarily based on various assumptions, involve
known and unknown risks and generally are subject to the inherent risks and
uncertainties surrounding expectations regarding future occurrences. As a
result, the Company's actual future experience may differ materially from the
results, achievements or performance described or implied in such statements.
Factors that might cause the Company's actual future experience to differ
materially from the forward-looking statements include, but are not limited to,
(i) the Company's absence of commercialized drug products, (ii) the Company's
dependence on third parties for clinical development and commercialization of
potential products, (iii) the potential failure of the Company's lead compound
currently in clinical trials to progress successfully through clinical
development, (iv) the potential failure of any drug candidates that emerge from
the Company's discovery operations to progress successfully to or through
clinical development, (v) competition, (vi) government regulation, (vii)
pharmaceutical pricing and (viii) the effect of any internal or external Year
2000 problems. Certain of these and additional factors that may cause the
Company's actual future experience to differ materially from the forward-looking
statements contained in this report are discussed in the Company's annual report
on Form 10-K for the fiscal year ended September 30, 1998.
11
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's cash flow and earnings are subject to fluctuations due to changes
in interest rates in its investment portfolio of debt securities, to the fair
value of equity instruments held, and to foreign currency exchange rates. The
Company maintains an investment portfolio of various issuers, types and
maturities. These securities are classified as available-for-sale and,
consequently, are recorded on the balance sheet at fair value with unrealized
gains or losses reported as a component of comprehensive income (loss). The
Company's investments in certain biotechnology companies are carried on either
the equity method of accounting or at cost for equity securities that do not
have readily determinable fair values. Other-than-temporary losses are recorded
against earnings in the same period the loss was deemed to have occurred. The
Company does not currently hedge this exposure and there can be no assurance
that other-than-temporary losses will not have a material adverse impact on the
Company's results of operations in the future.
12
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
On January 6, 1999, the Board of Directors of the Company adopted, subject to
stockholder approval, certain amendments to the Company's Certificate of
Incorporation. At the Annual Meeting of Stockholders held on March 24, 1999, the
amendments were approved. The Certificate of Incorporation amendments (1)
authorize 5,000,000 shares of preferred stock, par value $.01 per share, with
such designations, preferences, privileges, and restrictions as may be
determined from time to time by the Company's Board of Directors (see Article IV
of the Certificate of Incorporation, as amended), and (2) require that all
actions taken by stockholders must be taken at an annual or special meeting and
may not be taken by written consent (see Article VII of the Certificate of
Incorporation, as amended). The full text of the Certificate of Incorporation,
as amended, which is effective as of April 13, 1999, is filed herewith and
incorporated herein by reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on March 24, 1999. The
following nine directors were elected:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
1. Gary E. Frashier 17,775,507 980,539
2. Edwin A. Gee, Ph.D. 17,768,677 987,369
3. Colin Goddard 17,780,294 975,752
4. G. Morgan Brown 17,777,807 978,239
5. John H. French II 17,771,527 984,519
6. Daryl K. Granner, M.D. 17,778,394 977,652
7. Walter M. Lovenberg, Ph.D. 17,777,944 978,102
8. Steve M. Peltzman 17,692,746 1,063,300
9. John P. White 17,778,207 977,839
</TABLE>
An amendment to the Company's Certificate of Incorporation authorizing 5,000,000
shares of preferred stock was approved (11,470,673 shares voted in favor,
2,082,409 shares voted against, 163,687 shares abstained and there were
5,039,277 broker non-votes).
13
<PAGE> 16
An amendment to the Company's Certificate of Incorporation requiring that all
actions by stockholders must be taken at an annual or special meeting of
stockholders and not by written consent was approved (11,954,887 shares voted in
favor, 1,853,910 shares voted against, 125,413 shares abstained and there were
4,821,836 broker non-votes).
The appointment of KPMG LLP as the Company's independent accountants for the
year ending September 30, 1999 (18,566,549 shares voted in favor, 83,568 shares
voted against and 105,929 shares abstained).
ITEM 5. OTHER INFORMATION
LICENSE AGREEMENT REPLACING CO-VENTURE WITH BIOCHEM PHARMA, INC.
Pursuant to an Agreement (the "New Agreement"), dated March 19, 1999, the
Company and BioChem Pharma, Inc. (formerly BioChem Pharma International, Inc.)
("BioChem") amended their Collaborative Research, Development and
Commercialization Agreement, effective as of May 1, 1996, terminating certain
provisions contained therein, including, without limitation, provisions
establishing the research program. Under the New Agreement, BioChem received
from the Company a worldwide, irrevocable, exclusive license, and right to grant
sublicenses, in certain anti-viral targets for a license fee of $2 million. In
addition, each party will be free to independently pursue the discovery of new
compounds in the Hepatitis B and HIV areas without incurring any responsibility
to the other party. To the extent BioChem completes any clinical trials or
pursues any regulatory approvals for any products, however, it will pay
milestones to the Company. In additional, to the extent BioChem commercializes
certain compounds arising out of the joint venture, it will pay royalties to the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1* Certificate of Incorporation, as amended
3.2 Amended and Restated By-Laws (1)
10.1* Agreement, dated as of March 19, 1999, by and between
the Company and BioChem Pharma Inc.
27* Financial Data Schedule
----------
* Filed herewith.
(1) Included as an exhibit to the Company's current
report on Form 8-K, filed on January 8, 1999, and
incorporated herein by reference.
14
<PAGE> 17
(b) REPORTS ON FORM 8-K
The Company filed two current reports on Forms 8-K on January
8, 1999 and February 18, 1999, respectively, with the
Securities and Exchange Commission via EDGAR, pertaining to
the adoption of a Shareholders Rights Plan by the Board of
Directors. The earliest event covered by both reports occurred
on January 6, 1999.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
OSI PHARMACEUTICALS, INC.
--------------------------------------------
(Registrant)
Date: May 14, 1999 /s/ Colin Goddard, Ph.D
--------------------------------------------
Colin Goddard, Ph.D.
President and Chief Executive Officer
Date: May 14, 1999 /s/ Robert L. Van Nostrand
--------------------------------------------
Robert L. Van Nostrand
Vice President and Chief Financial Officer
(Principal Financial Officer)
16
<PAGE> 19
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1* Certificate of Incorporation, as amended
3.2 Amended and Restated By-Laws (1)
10.1* Agreement, dated as of March 19, 1999, by and between the
Company and BioChem Pharma Inc.
27* Financial Data Schedule
- ----------
* Filed herewith.
(1) Included as an exhibit to the Company's current report on Form 8-K,
filed on January 8, 1999, and incorporated herein by reference.
17
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OSI PHARMACEUTICALS, INC.
----------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
---------------------------------
We, the President and Secretary of OSI PHARMACEUTICALS, INC., a
corporation existing under the laws of the State of Delaware, do hereby certify
as follows:
FIRST: That Article IV of the Certificate of Incorporation of
said corporation has been amended in its entirety to read as follows:
ARTICLE IV
CAPITAL STOCK
(a) Authorized Stock. The total number of shares of stock which the
Corporation shall have authority to issue is 55,000,000 shares, consisting of
50,000,000 shares of Common Stock, having a par value of $.01 per share, and
5,000,000 shares of Preferred Stock having a par value of $.01 per share.
(b) Preferred Stock. The board of directors is authorized, subject
to limitations prescribed by law and the provisions of this Article IV, to
provide for the issuance of shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and other special and
relative rights of the shares of each such series and the qualifications,
limitations or restrictions thereof.
The authority of the board of directors with respect to each series
shall include, but not be limited to, determination of the following:
i. the number of shares constituting that series and the distinctive
designation of that series, which number may be increased and
decreased (but not below the number of shares then outstanding) from
time to time by action of the board of directors;
<PAGE> 2
ii. the dividend rate, if any, on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends
on shares of that series;
iii. whether that series shall have voting rights in addition to the
voting rights provided by law, and if so, the terms of such voting
rights;
iv. whether that series shall have conversion privileges, and if so,
the terms and conditions of such conversion, including provision for
adjustment of the conversion rate upon the occurrence of such events
as the board of directors shall determine;
v. whether the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date
or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;
vi. whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and
amounts of such sinking fund; and
vii. the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, and the relative rights of priority, if any, of
payment of shares of that series; and any other relative rights,
preferences and limitations of that series.
SECOND: That Article VII of the Certificate of Incorporation of said
corporation has been amended in its entirety to read as follows:
<PAGE> 3
ARTICLE VII
MEETINGS OF STOCKHOLDERS AND
MEETINGS AND CONSENTS OF DIRECTORS;
CORPORATION BOOKS; ELECTIONS OF DIRECTORS;
AND NOTICES
Meetings of holders of Capital Stock of the Corporation and of the board
of directors and of any committee thereof may be held outside the State of
Delaware if the by-laws so provide. Except as otherwise provided by law or by
this certificate of incorporation, all actions of stockholders shall be taken at
an annual or special meeting of stockholders of the Corporation. No stockholder
action may be taken without a meeting, without prior notice and without a vote.
Any action required or permitted to be taken at any meeting of the board of
directors or of any committee thereof may be taken without a meeting as provided
by statute if the by-laws of the Corporation so provide. The elections of
directors need not be by ballot unless the by-laws of the Corporation so
provide. Except as otherwise provided by law, the books of the Corporation may
be kept outside the State of Delaware at such place or places as may be
designated from time to time by the board of directors or in the by-laws of the
Corporation. Any notice permitted or required by this certificate of
incorporation shall be written, signed by the sender and mailed, postage
prepaid, in the United States by certified or registered mail.
THIRD: That such amendments have been duly adopted in accordance
with the provisions of the General Corporation Law of the State of Delaware by
the affirmative vote of the holders of not less than a majority of the
outstanding stock entitled to vote thereon.
IN WITNESS WHEREOF, we have signed this certificate this 12th day of
April, 1999.
/s/ Colin Goddard
------------------------------
Colin Goddard, Ph.D.
President and Chief Executive Officer
ATTEST: /s/ Robert L. Van Nostrand
------------------------------
Robert L. Van Nostrand
Secretary
<PAGE> 4
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
OSI Pharmaceuticals, Inc.
INTO
Oncogene Science, Inc.
(Pursuant to Section 253 of the General
Corporation Law of Delaware)
Oncogene Science, Inc., a Delaware corporation (the "Corporation"), does
hereby certify:
FIRST: That the Corporation is incorporated pursuant to the
General Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares
of each class of the capital stock of OSI Pharmaceuticals, Inc., a Delaware
corporation.
THIRD: That the Corporation, by the following resolutions of its
Board of Directors, duly adopted at a meeting thereof held on June 11, 1997,
determined to merge OSI Pharmaceuticals, Inc. into itself on the conditions
set forth in such resolutions:
RESOLVED, that the Corporation authorizes the formation
of a subsidiary under the Delaware General Corporation Law to
be named OSI Pharmaceuticals, Inc. and to be wholly-owned by
the Corporation; and further
RESOLVED, that effective October 1, 1997, the subsidiary
shall be merged with and into the Corporation, with the
Corporation to be the surviving corporation, and, upon the
effective date of the merger, the name of the surviving
corporation shall be changed to OSI Pharmaceuticals, Inc.; and
further
<PAGE> 5
RESOLVED, that the officers of the Corporation be, and
they hereby are, authorized, empowered and directed to take
such actions as shall be necessary or appropriate to
effectuate the foregoing resolutions.
FOURTH: That this certificate of ownership and merger shall not
become effective until 12:01 a.m. Eastern Time on October 1, 1997.
IN WITNESS WHEREOF, Oncogene Science, Inc. has caused its corporate seal
to be affixed hereto and this certificate to be signed by Robert L. Van
Nostrand, its authorized officer, this 26th day of September, 1997.
[SEAL] ONCOGENE SCIENCE, INC.
By: /s/ Robert L. Van Nostrand
-----------------------------
Robert L. Van Nostrand
Vice President and
Chief Financial Officer
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ONCOGENE SCIENCE, INC.
I, the President of Oncogene Science, Inc., a corporation organized
and existing under the laws of the State of Delaware (the "Corporation"), do
hereby certify that (i) Article Fourth of the Corporation's Certificate of
Incorporation has been amended in its entirety to read as set forth below, and
(ii) such amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock that the Corporation
shall have authority to issue is 50,000,000 shares of common stock,
having a par value of $.01 per share, all of the same class.
IN WITNESS WHEREOF, I have hereunto set my hand and seal as of the
31st day of March, 1993.
(Corporate Seal)
Attest:
/s/ Theresa R. Dragone /s/ Gary E. Frashier (SEAL)
- ------------------------------ ------------------------------
Theresa R. Dragone Gary E. Frashier, President
Secretary
<PAGE> 7
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ONCOGENE SCIENCE, INC.
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
We, the President and Secretary of ONCOGENE SCIENCE, INC., a
corporation existing under the laws of the State of Delaware, do hereby certify
as follows:
FIRST: That Article IX of the Certificate of Incorporation of said
corporation has been amended in its entirety to read as follows:
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 1. Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is involved
in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
("Proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was the director, officer,
employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit
plans, whether the basis of such Proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in
any other capacity
<PAGE> 8
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (out, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment),
against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by such
person in connection therewith; provided, however, that the
Corporation shall indemnify any such person seeking indemnity in
connection with a Proceeding (or part thereof) initiated by such
person only if the proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 1 shall be a contract
right and shall include the right to be paid by the Corporation
expenses incurred in defending any such Proceeding in advance of its
final disposition; provided, however, that if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a
director or officer in his capacity as a director or officer (and
not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the
final disposition of such Proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it
should be determined ultimately that such director of officer is not
entitled to be indemnified under this Section or otherwise.
SECTION 2. Non-Exclusivity of Rights. The rights conferred on
any person by Section 1 shall not be exclusive of any other right
which such person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-laws, agreement,
vote of stockholders or disinterested directors, or otherwise.
SECTION 3. Limitation of Liability of Directors. A director of
the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach
<PAGE> 9
of fiduciary duty as a director except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper
personal benefit.
SECTION 4. Insurance. The Corporation may maintain insurance,
at its expense, to protect itself and any such director, officer,
employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECOND: That such amendment has been duly adopted in accordance with
the provisions of the General Corporation Law of the State of Delaware by the
affirmative vote of the holders of not less than a majority of the outstanding
stock entitled to vote thereon.
IN WITNESS WHEREOF, we have signed this certificate this 9th day of
April, 1987.
/s/ Robert E. Ivy
------------------------------
Robert E. Ivy, President
ATTEST: /s/ Gary Takata
------------------------------
Gary Takata, Secretary
<PAGE> 10
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ONCOGENE SCIENCE, INC.
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
We, the President and Secretary of ONCOGENE SCIENCE, INC., a
corporation existing under the laws of the State of Delaware, do hereby certify
as follows:
FIRST: That Article FOURTH of the Certificate of Incorporation of
said corporation has been amended in its entirety to read as follows:
"FOURTH. The total number of shares of stock which the
Corporation shall have authority to issue is 20,000,000 shares of
common stock, of the par value of $.01 per share, all of the same
class."
SECOND: That such amendment has been duly adopted in accordance with
the provisions of the General Corporation Law of the State of Delaware by the
written consent of the holders of not less than a majority of the outstanding
stock entitled to vote thereon and that written notice of the corporation action
has been given to those stockholders who have not consented in writing, all in
accordance with the provisions of Section 228 of the General Corporation Law.
<PAGE> 11
IN WITNESS WHEREOF, we have signed this certificate this 18th day of
January, 1986.
/s/ Robert E. Ivy
------------------------------
Robert E. Ivy, President
ATTEST: /s/ Gary Takata
------------------------------
Gary Takata, Secretary
<PAGE> 12
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ONCOGENE SCIENCE, INC.
(a Delaware corporation)
Adopted in accordance with the
provisions of Section 241 of the
General Corporation Law of the
State of Delaware
THE UNDERSIGNED, Steven Gelles, sole incorporator of ONCOGENE
SCIENCE, INC., does hereby certify:
FIRST: That the Certificate of Incorporation of ONCOGENE SCIENCE,
INC. (the "Corporation") was filed in the office of the Secretary of State of
Delaware on March 6, 1983 and a certified copy thereof was recorded in the
office of the Recorder of Kent County, Delaware on March 16, 1983.
SECOND: That the Corporation has not received payment for its stock.
THIRD: That the Certificate of Incorporation of the Corporation is
amended as follows:
(i) By striking out paragraph FIRST thereof as it now exists
and inserting in lieu thereof ARTICLE I, reading as
follows:
ARTICLE I
NAME
The name of the corporation is ONCOGENE SCIENCE, INC.
<PAGE> 13
(ii) By striking out paragraph SECOND thereof as it now
exists and inserting in lieu thereof ARTICLE II, reading
as follows:
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The registered office of the Corporation in the State of Delaware is
located at 229 South State Street, City of Dover, County of Kent. The name and
the address of the registered agent of the Corporation in the State of Delaware
is The Prentice-Hall Corporation System, Inc., 229 South State Street, Dover,
Delaware.
(iii) By striking out paragraph THIRD thereof as it now exists
and inserting in lieu thereof ARTICLE III, reading as
follows:
ARTICLE III
CORPORATE PURPOSES AND POWERS
The nature of the business of the Corporation, or the objects or
purposes to be transacted, promoted or carried on by the Corporation are any and
all lawful acts or activities for which corporations may be organized under the
General Corporation Law of Delaware, including but not limited to research and
development, manufacture, production, purchase or acquisition, and sale,
licensing, leasing, or disposition of materials, supplies, substances, chemicals
or equipment used or useful in the field of biotechnology or in any other field
in which such materials, supplies, substances, chemicals or equipment may
profitably be used.
(iv) By striking out paragraph FOURTH thereof as it now
exists and inserting in lieu thereof ARTICLE IV, reading
as follows:
ARTICLE IV
CAPITAL STOCK
The amount of the total authorized capital stock of this Corporation
is One Hundred Thousand Dollars ($100,000) consisting of Ten Million
(10,000,000) common shares, with a par value of one cent ($.01) each.
(v) By striking out paragraph FIFTH thereof as it now exists
and inserting in lieu thereof ARTICLE V, reading as
follows:
<PAGE> 14
ARTICLE V
INCORPORATOR
The name and mailing address of the sole incorporator of the
Corporation is:
Name Address
---- -------
Steven Gelles 122 East 42nd Street
Suite 606
New York, New York 10168
(vi) By adding thereto additional ARTICLES VI - XI, reading
as follows:
ARTICLE VI
POWERS OF BOARD OF DIRECTORS
In addition to and not in limitation of the powers conferred by
statute, the board of directors of the Corporation expressly is authorized:
(a) To make, adopt, alter, amend or repeal the by-laws, except
as otherwise expressly provided in any by-law adopted by the holders of
Capital Stock of the Corporation entitled to vote thereon. Any by-law may
be altered, amended or repealed by the holders of Capital Stock of the
Corporation entitled to vote thereon at any annual meeting or at any
special meeting called for that purpose;
(b) To authorize and cause to be executed mortgages, liens,
and other security interests upon the real and personal property of the
Corporation;
(c) To determine the use and disposition of any surplus and
net profits of the Corporation including, without limitation by
specification, the determination of the amount of working capital required
by the Corporation, to set apart out of any of the funds of the
Corporation, whether or not available for dividends, a reserve or reserves
for any proper purpose and to abolish any such reserve in the manner in
which it was created;
(d) To designate, by resolution passed by a majority of the
members of the board of directors, one or more committees, each consisting
of two or more directors of the Corporation which, to the extent provided
in the resolution designating
<PAGE> 15
the committee or provided in the by-laws of the Corporation, have and may
exercise, subject to the provisions of the General Corporation Law of
Delaware, all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation. Such committee
or committees may authorize the seal of the Corporation to be affixed to
all papers which may require it. Such committee or committees shall have
such name or names as may be provided in the by-laws of the Corporation or
as may be determined from time to time by resolution adopted by the board
of directors;
(e) To grant rights or options entitling the holders thereof
to purchase from the Corporation shares of its Capital Stock evidenced by
or in such instrument or instruments as shall be approved by the board of
directors. The terms upon which, the time or times at or within which, the
persons to whom, and the price or prices at which any such rights or
options may be issued and any shares of Capital Stock may be purchased
from the Corporation upon the exercise of any such right or option shall
be such as shall be fixed in a resolution or resolutions adopted by the
board of directors providing for the creation and issuance of such rights
or options. In the absence of actual fraud in the transaction, the
judgment of the board of directors as to the consideration for the
issuance of such rights or options and the sufficiency thereof shall be
conclusive. No such rights or options shall be invalidated or in any way
affected by the fact that any director shall be a grantee thereof or shall
vote for the issuance of such rights or options to himself or for any plan
pursuant to which he may receive any such rights or options;
(f) To adopt such plans as from time to time may be approved
by the board of directors for the purchase by officers or employees of the
Corporation and of any corporation either affiliated with or a subsidiary
of the Corporation of shares of Capital Stock of the Corporation. The
terms upon which, the time or times at or within which and the price or
prices at which shares of Capital Stock may be purchased from the
Corporation pursuant to such plan shall be fixed in the plan by the board
of directors. No such plan which is not at the time of adoption
unreasonable or unfair shall be invalid or in any way affected because any
director shall be entitled to purchase shares of Capital Stock of the
Corporation thereunder and shall vote for such plan;
(g) To adopt or assume and carry out such plans as from time
to time may be approved by the board of directors for the distribution
among the officers or employees of the Corporation and of any corporation
which is affiliated with or a subsidiary of the Corporation, or any of
them, in addition to their regular salaries, of part of the earnings of
the Corporation, in consideration for or in recognition of services
rendered by such officers or employees or as an inducement to future
efforts. No such
<PAGE> 16
plan which is not at the time of adoption or assumption unreasonable or
unfair shall be invalidated or in any way affected because any director
shall be a beneficiary thereunder or shall vote for any plan under which
he may benefit or for any distribution thereunder in which he may
participate;
(h) To adopt such pension, profit sharing, retirement,
deferred compensation or other employee benefit plans or provisions as
may, from time to time, be approved by the board of directors, providing
for pensions, profit sharing, retirement income, deferred compensation or
other benefits for officers or employees of the Corporation and of any
corporation which is affiliated with or a subsidiary of the Corporation,
or any of them, in consideration for or in recognition of the services
rendered by such officers or employees or as an inducement to future
efforts. No such plan or provision, which is not at the time of adoption
unreasonable or unfair shall be invalidated or in any way affected because
any director shall be a beneficiary thereunder or shall vote for any plan
or provision under which he may benefit; and
(i) To exercise, in addition to the powers and authorities
herein or by law conferred upon the board of directors, any such powers
and authorities and do all such acts and things as may be exercised or
done by the Corporation subject, nevertheless, to the provisions of the
General Corporation Law of Delaware, this certificate of incorporation and
any by-laws from time to time adopted by the holders of Capital Stock of
the Corporation entitled to vote thereon.
ARTICLE VII
MEETINGS AND CONSENTS OF STOCKHOLDERS AND DIRECTORS;
CORPORATION BOOKS; ELECTIONS OF DIRECTORS;
AND NOTICES
Meetings of holders of Capital Stock of the Corporation and of the
board of directors and of any committee thereof may be held outside the State of
Delaware if the by-laws so provide. Except as otherwise provided by law or by
this certificate of incorporation, any action required to be taken at any
annual, or special meeting of stockholders of the Corporation or any action
which may be taken at any annual or special meeting of such stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding Capital Stock having not less than the minimum number of votes that
would be necessary to authorize or to take such action at a meeting at which all
shares of Capital Stock entitled to vote thereon were present and voted. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing. Any action required or permitted to be taken
<PAGE> 17
at any meeting of the board of directors or of any committee thereof may be
taken without a meeting as provided by statute if the by-laws of the Corporation
so provide. Except as otherwise provided by law, the books of the Corporation
may be kept outside the State of Delaware at such place or places as may be
designated from time to time by the board of directors or in the by-laws of the
Corporation. The elections of directors need not be by ballot unless the by-laws
of the Corporation so provide. Any notice permitted or required by this
certificate of incorporation shall be written, signed by the sender and mailed,
postage prepaid, in the United States by certified or registered mail.
ARTICLE VIII
TRANSACTIONS WITH DIRECTORS AND OFFICERS
No contract or transaction between the Corporation and one or more
of its directors or officers or between the Corporation and any other
corporation, partnership, association or other organization, in which one or
more of its directors or officers are directors or officers or have a financial
interest, shall be void or voidable solely for such reason or solely because the
director or officer is present at or participates in the meeting of the board of
directors or committee thereof which authorizes the contract or transaction or
solely because his or their votes are counted for such purpose if: (a) The
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the board of directors or the
committee and the board of directors or the committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors even though the disinterested directors may be less than
a quorum; or (b) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (c) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the board of directors, a committee thereof or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the stockholders or the board of directors
or of a committee which authorizes the contract or transaction.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification by Corporation.
(a) Any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than action by or in the right of the
<PAGE> 18
Corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
be indemnified by the Corporation, unless similar indemnification is
provided by such other corporation or organization which may be involved
(any funds received by any person as a result of the provisions of this
Article shall be deemed an advance against his receipt of any such other
indemnification from any such other corporation or organization), against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Any such person who could be indemnified pursuant to the preceding
sentence except for the fact that the subject action or suit is or was by
or in the right of the Corporation shall be indemnified by the Corporation
against expenses (including attorneys' fees) actually and reasonably
incurred by him, in connection with the defense or settlement of such
action or suit except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of
his duties to the Corporation unless and only to the extent that the Court
of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper;
(b) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in paragraph (a) of
this Section 1 or in defense of any claim, issue or matter therein, he
shall be indemnified by the Corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith without the necessity of any action being taken by the
Corporation other than the determination, in good faith, that such defense
has been successful. In all other cases wherein indemnification is
provided by this Article, unless ordered by a court, indemnification shall
be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct specified in this Article. Such determination shall be
made: (1) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding; or (2) if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent
<PAGE> 19
legal counsel in a written opinion; or (3) by the holders of a majority of
the Capital Stock outstanding;
(c) The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere
or its equivalent shall not create, of itself, a presumption that the
person seeking indemnification did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests
of the Corporation and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful. Entry of a
judgment by consent as part of a settlement shall not be deemed final
adjudication of liability for negligence or misconduct in the performance
of duty or of any other issue or matter;
(d) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the board
of directors in the specific case upon receipt of an undertaking by the
director, officer, employee or agent involved to repay such amount unless
it ultimately shall be determined that he is entitled to be indemnified by
the Corporation; and
(e) The indemnification provided in this Article shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
an official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
SECTION 2. Insurance. By action of the board of directors,
notwithstanding any interest of the directors in the action, the Corporation may
purchase and maintain insurance, in such amounts as the board of directors deems
appropriate, on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the Corporation shall have the power to
indemnify him against such liability under the provisions of this Article.
<PAGE> 20
ARTICLE X
COMPROMISE OR ARRANGEMENT BETWEEN CORPORATION
AND ITS CREDITORS OR STOCKHOLDERS
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE XI
RESERVATION OF RIGHT TO AMEND CERTIFICATE
OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in this certificate of incorporation in the manner now
or hereafter prescribed by law and by this certificate of incorporation. All the
provisions of this certificate of incorporation and all rights and powers
conferred in this certificate of incorporation on stockholders, directors and
officers are subject to such reserved power.
FOURTH: That such amendment has been duly adopted in accordance with
the provision of Section 241 of the General Corporation Law of the State of
Delaware.
<PAGE> 21
IN WITNESS WHEREOF, I have signed this certificate this 15th day of
April, 1983.
/s/ Steven Gelles
------------------------------
STEVEN GELLES
<PAGE> 22
CERTIFICATE
OF
INCORPORATION
OF
ONCOGENE SCIENCE, INC.
FIRST: The name of this Corporation is ONCOGENE SCIENCE, INC.
SECOND: Its Registered Office in the State of Delaware is to be located
at 600 Bay Road, in the City of Dover, Zip Code 19901. The
Registered Agent in charge thereof is Ms. Pam Goldsborough.
THIRD: The purpose of the Corporation is to perform research and to
develop, manufacture, produce, purchase or otherwise acquire, and
to sell, license, lease or otherwise dispose of materials,
supplies, substances, chemicals or equipment used or useful in
the field of Biotechnology or in any other field in which such
materials, supplies, substances, chemicals or equipment may be
profitably used and to engage in any lawful act or activity for
which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The amount of the total authorized capital stock of this Corporation
is One Hundred Thousand Dollars ($100,000) divided into Ten Million
(10,000,000) shares, of One Cent ($.01) each.
FIFTH: The name and mailing address of the incorporator are as follows:
Name: Steven Gelles
Mailing Address: 122 East 42nd Street, Suite 606
Zip Code: New York, New York 10168
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the laws of
the State of Delaware, do make, file and record this Certificate, and do certify
that the facts herein stated are true, and I have accordingly hereto set my hand
this Tenth day of March, 1983.
/s/ Steven Gelles
- ---------------------------- ------------------------------
- ----------------------------
<PAGE> 1
Portions of this Exhibit 10.1 have be redacted and are the subject
of a confidential treatment request filed with the Secretary of the Securities
and Exchange Commission.
<PAGE> 2
AGREEMENT
This Agreement ("Agreement") dated as of March 19, 1999 between OSI
Pharmaceuticals, Inc. (formerly named Oncogene Science, Inc.), a Delaware
corporation, having its principal place of business at 106 Charles Lindbergh
Boulevard, Uniondale, New York 11553 ("OSI"), and BioChem Pharma Inc., a
corporation incorporated under the laws of Canada, having its registered office
at 275 Boul. Armand-Frappier, Laval, Quebec, Canada H7V 4A7 ("BioChem")
(formerly BioChem Pharma International Inc.).
WITNESSETH:
WHEREAS, BioChem and OSI are parties to a Collaborative Research,
Development and Commercialization Agreement, with an effective date of May 1,
1996, as amended on October 29, 1996 and February 1997 (as amended, the "CRDC
Agreement"); and
WHEREAS, BioChem and OSI intend to terminate the CRDC Agreement and by
this Agreement to change the relationship between them provided for in the CRDC
Agreement; and WHEREAS, BioChem and OSI are parties to a Technology Transfer
Agreement, with an effective date of August 25, 1996; and
WHEREAS, BioChem and OSI intend by this Agreement to amend the terms of
the Technology Transfer Agreement; and
WHEREAS, commencing as of November 30, 1998 (the "Effective Date"),
this Agreement between OSI and BioChem will be effective.
NOW, THEREFORE, the Parties agree as follows:
<PAGE> 3
ARTICLE I
INTERPRETATION
1.1. DEFINED TERMS. In this Agreement, unless the context or subject
matter is inconsistent therewith, the following terms and expressions shall have
the following meanings:
1.1.1. "Affiliate" shall mean, with respect to any Person
(including a Party), any other Person which directly or indirectly controls or
is controlled by, or is under direct or indirect common control with, such first
mentioned Person or any Person which is directly or indirectly controlled by a
Person which controls the first mentioned Person; for the purpose of this
definition, "control" shall mean, with respect to any Person (including any
Party), the ownership of more than 50% of the voting shares or other voting
equity of that Person.
1.1.2. "Analogue" shall mean a derivative or modification of a
Lead Compound which is structurally similar to such Lead Compound but differs
from it with respect to at least one component.
1.1.3. "BioChem Confidential Information" shall mean all
confidential information disclosed to OSI as "confidential" or designated as
"confidential" to OSI, to the extent that such information as of the date of
disclosure to OSI was not (a) demonstrably known to OSI as evidenced by written
documentation other than by virtue of a prior confidential disclosure to OSI by
BioChem or its Affiliates, or (b) disclosed in the published literature or
otherwise to the public through no fault of OSI, its Affiliates, employees or
consultants, or (c) obtained from a third party without binder of secrecy;
provided that such third party has no obligation of confidentiality to BioChem
or its Affiliates.
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<PAGE> 4
1.1.4. "BioChem Patent Rights" shall mean Patent Rights, as
set forth on Exhibit A hereto, claiming inventions that are conceived and
reduced to practice solely by employees of BioChem or its Affiliates.
1.1.5. "BioChem Technology" shall mean and include all
technology and technical information, including all inventions, chemical
structures and methods for synthesis, structure-activity relationships, assay
methodology, methods, processes, formulae, plans, specifications,
characteristics, equipment and equipment designs, know how, trade secrets,
discoveries, results, formulations and biological, toxicological and clinical
data and physical, chemical or biological material, which are developed by
employees of, or consultants to, BioChem and/or its Affiliates, prior to or
during the term of the CRDC Agreement or acquired by purchase, license,
assignment or other means from third parties prior to or during the term of the
CRDC Agreement that is not Joint Technology, but only to the extent that BioChem
or its Affiliates is legally entitled to disclose such technology and technical
information.
1.1.6. "Confidential Information" shall have the meaning set
forth in Section 7.1 hereof.
1.1.7. "Effective Date" shall mean November 30, 1998.
1.1.8. "Exclusive Field" shall mean ** for which an exclusive
license has been granted by OSI to BioChem pursuant to Article IV hereof
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
-3-
<PAGE> 5
1.1.9. "FDA" shall mean the United States Food and Drug
Administration.
1.1.10. "Field" shall mean the Exclusive Field and the
Non-Exclusive Field.
1.1.11. "Independent Third Party" shall mean any Person other
than BioChem, OSI and/or any of their respective Affiliates.
1.1.12. "Joint Patent Rights" shall mean Patent Rights,
including those set forth on Exhibit B hereto, claiming inventions that are
conceived and reduced to practice jointly, solely in respect of the Field during
the term of the CRDC Agreement, by employees or consultants of OSI and employees
or consultants of BioChem and of their respective Affiliates.
1.1.13. "Joint Technology" shall mean and include all
technology and information, including all inventions, chemical structures and
methods for synthesis, structure-activity relationships, assay methodology,
methods, processes, fortnulae, plans, specifications, characteristics, equipment
and equipment designs, know how, trade secrets, discoveries, formulations and
biological, toxicological and clinical data, that were developed jointly by
employees of, or consultants to, BioChem and OSI solely in respect of the Field,
described on Exhibit C hereto, such that BioChem and OSI, each having
contributed to the development of such technology and technical information,
owns an undivided interest therein.
1.1.14. "Lead Compound" shall mean any compound as set forth
on Exhibit D hereto.
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<PAGE> 6
1.1.15. "NDA" shall mean a new drug application filed with the
FDA with respect to a Product.
1.1.16. "Net Sales" shall mean the gross amounts actually
received by BioChem and its Affiliates and Sublicensees from arms' length sales
of Product(s) to third parties, whether invoiced or not, less:
(a) Trade, quantity and cash discounts allowed;
(b) Refunds, rebates, chargebacks, retroactive
price adjustments, and any other allowances
which effectively reduce the net selling
price;
(c) Product returns and allowances;
(d) Any tax imposed on the Product other than
income tax that is appropriately deducted
from sales; and
(e) Allowance for distribution expenses.
Such amounts shall be determined from the books and records of BioChem and its
Affiliates and sublicensees, as appropriate, maintained in accordance with
generally accepted accounting principles ("GAAP"), consistently applied.
In the event a Product is sold in combination with another product(s),
the Net Sales from the combination product, for the purposes of determining
royalty payments, shall be determined by multiplying the Net Sales of the
combination product by the fraction A/(A+B), where A is the average sale price
of the Product when sold separately and B is the average sale price of the other
product(s) when sold separately in finished form.
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<PAGE> 7
1.1.17. "Non-Exclusive Field" shall mean Hepatitis B Virus
("HBV") and Human Immunodeficiency Virus ("HIV") for which non-exclusive cross
licenses have been granted pursuant to Article V hereof.
1.1.18. "OSI Confidential Information" shall mean all
confidential information disclosed to BioChem as "confidential" or designated as
"confidential" to BioChem, to the extent that such information as of the date of
disclosure to BioChem is not (a) demonstrably known to BioChem as evidenced by
written documentation other than by virtue of a prior confidential disclosure to
BioChem by OSI or its Affiliates, or (b) disclosed in the published literature
or otherwise to the public through no fault of BioChem, its Affiliates,
employees or consultants, or (c) obtained from a third party without binder of
secrecy; provided that such third party has no obligation of confidentiality to
OSI or its Affiliates.
1.1.19. "OSI Patent Rights" shall mean Patent Rights, as set
forth on Exhibit E hereto, claiming inventions that are conceived and reduced to
practice solely by employees of OSI or its Affiliates.
1.1.20. "OSI Technology" shall mean and include all technology
and technical information, including all inventions, chemical structures and
methods for synthesis, structure-activity relationships, assay methodology,
methods, processes, formulae, plans, specifications, characteristics, equipment
and equipment designs, know how, trade secrets, discoveries, results,
formulations and biological, toxicological and clinical data and physical,
chemical or biological material, which are developed by employees of, or
consultants to, OSI and/or its Affiliates, prior to or during the term of the
CRDC Agreement or acquired by purchase, license, assignment or other means from
third parties prior to or during the term of
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<PAGE> 8
the CRDC Agreement that is not Joint Technology, but only to the extent that OSI
or its Affiliates is legally entitled to disclose such technology and technical
information.
1.1.21. "Patent Rights" shall mean all patents and patent
applications, including any divisional, continuation, continuation-in-part,
reissue, renewal or extension thereof, or substitute therefor, and the letters
patent that may be issued thereon, any registration or confirmation of such
letters patent, relating to Joint Technology, Lead Compounds or Products, their
methods of manufacture or uses of intermediates therefor, or formulations
thereof.
1.1.22. "Product" shall mean any and all products in final,
approved, packaged and labeled pharmaceutical dosage form suitable for sale to
and use by an end user containing a Lead Compound or Analogue emanating from the
Joint Technology in the Exclusive Field and any and all formulations, mixtures
or compositions thereof. Product shall include all of its indications.
1.1.23. "Technology Transfer Agreement" shall mean the
Technology Transfer Agreement, dated August 26, 1996, between OSI and BioChem.
1.2. Any capitalized terms used but not defined herein shall have the
same meanings as in the CRDC Agreement.
ARTICLE II
TERMINATION OF CRDC AGREEMENT
2.1. OSI and BioChem hereby agree that the CRDC Agreement is terminated
as of the Effective Date and is of no further force and effect. Subject to the
obligations set forth in this Agreement, each of the Parties hereto hereby
releases the other Party and its respective
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<PAGE> 9
officers, directors, stockholders, employees, agents, successors and assigns
from and against any and all claims of any nature, in law or equity, past,
present or future, known or unknown, fixed or contingent, which they may have
under or in respect of the CRDC Agreement.
2.2. Upon termination of the CRDC Agreement, and save and except for
any Confidential Information with respect to Joint Technology relating to the
license rights referred to in Articles IV and V hereof, OSI and BioChem shall
each promptly return to the other party all of the other party's Confidential
Information and all copies thereof; none of OSI, BioChem or any of their
respective Affiliates shall have any further obligations thereunder except as
provided in this Agreement.
2.3. Each Party confirms that the other Party and its Affiliates shall,
on and after the Effective Date, be free to conduct research activities within
the Field, subject to the terms and conditions of this Agreement.
ARTICLE III
PAYMENT; DELIVERY OF MATERIALS
3.1. PAYMENT. Upon the execution of this Agreement, BioChem agrees to
pay the sum of Two Million US Dollars (US $2,000,000) to OSI, which amount
includes license fees for license rights referred to in Article IV hereof and
valuable consideration for amending the value of the Licensed Technology in the
Technology Transfer Agreement referred to in Article VIII hereof. Upon such
payment from BioChem to OSI and subject to any payments provided for in Sections
4.3 and 4.4 hereof, BioChem and OSI have settled all costs and expenses owing to
each other pursuant to the CRDC Agreement.
-8-
<PAGE> 10
3.2. DELIVERIES OF MATERIALS.
3.2.1. OSI shall deliver to BioChem the materials constituting
Joint Technology, as listed on Exhibit F hereto, no later than 30 days following
the date of execution of this Agreement, to allow BioChem to exercise its
license rights in the Exclusive Field, as set forth in Section 4.1.1 hereto.
3.2.2. BioChem shall deliver to OSI the materials constituting
Joint Technology, as listed on Exhibit F hereto, no later than 30 days following
the date of execution of this Agreement, to allow OSI to carry out research and
development activities in the Non-Exclusive Field, as set forth in Section 5.2
hereto.
3.2.3. OSI shall deliver to BioChem the materials constituting
Joint Technology, as listed on Exhibit F hereto, no later than 30 days following
the date of execution of this Agreement, to allow BioChem to carry out research
and development activities in the Non-Exclusive Field, as set forth in Section
5.1 hereto.
ARTICLE IV
**
4.1. LICENSES.
4.1.1. License to BioChem. For good and valuable
consideration, OSI
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
-9-
<PAGE> 11
hereby grants to BioChem a worldwide, irrevocable, exclusive license, in
perpetuity, including the right to grant sublicenses, under the Joint Patent
Rights and Joint Technology in the Exclusive Field to conduct research and to
develop, make, have made, use, sell and have sold Products. OSI agrees that it
shall have no rights to use the Joint Patent Rights and Joint Technology for any
purpose whatsoever, including research activities, in the Exclusive Field.
4.1.2. Sublicenses. If BioChem grants a sublicense pursuant to
Section 4.1.1 hereof, BioChem shall guarantee that any sublicensee fulfills all
of its obligations under this Agreement. In the event BioChem grants sublicenses
under Section 4.1.1 to others to make, have made, use, sell or have sold
Products, such sublicenses shall include an obligation of the sublicensees to
account for and report all Net Sales of Products to BioChem on the same basis as
if such sales were Net Sales of Products by BioChem, in accordance with Section
4.4 hereof.
4.2. REPORTING REQUIREMENTS.
4.2.1. BioChem shall prepare and submit to OSI, on or about
each anniversary of the Effective Date hereof, a written report which shall (a)
list the Lead Compounds or Analogues that are, or may be considered to be
BioChem, candidates for Phase I clinical trials, and (b) briefly describe
BioChem's progress during the previous calendar year with respect to the Lead
Compounds or Analogues previously identified as candidates for Phase I clinical
trials. Such report may be general in nature and shall not include any BioChem
proprietary information.
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<PAGE> 12
4.2.2. Within 30 days after the first sale of any Product,
BioChem shall prepare and submit to OSI a concise written report which shall
include the name of such Product and the locations were the Product is sold or
to be sold.
4.3. MILESTONE PAYMENTS.
4.3.1. BioChem shall make a milestone payment to OSI of **
upon the successful completion of Phase I clinical trials for each Lead Compound
or Analogue. Each Lead Compound or Analogue can give rise to only one such
milestone payment.
4.3.2. Upon the filing of an NDA with the FDA or an equivalent
filing with appropriate regulatory authorities in Europe or in Asian countries
for each Product, BioChem shall make a milestone payment to OSI of **. Each
Product can give rise to only one such milestone payment.
4.3.3. Upon approval of an NDA by the FDA or receipt of an
equivalent approval in Europe or in an Asian country for marketing approval for
each Product, BioChem shall pay OSI the sum of **. Each Product can give rise to
only one such milestone payment.
4.4. ROYALTIES, PAYMENTS OF ROYALTIES, ACCOUNTING FOR ROYALTIES,
RECORDS.
4.4.1. Royalties - Lead Compounds. BioChem shall pay OSI a
royalty at the rate of ** of the Net Sales by BioChem and its Affiliates of each
Product containing a Lead Compound. BioChem shall continue to pay such royalty
on Net Sales of each Product in
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
-11-
<PAGE> 13
each country (a) so long as the manufacture, use or sale of which is covered by
a valid claim under the Joint Patent Rights with respect to such Product in such
country or (b) if not covered by a valid claim under the Joint Patent Rights,
for 10 years from the date of first commercial sale of such Product in each such
country. If BioChem sublicenses its rights to a Lead Compound under this
Agreement to a third party, BioChem shall pay to OSI an amount equal to the
greater of (i) ** of the applicable royalty payment due to BioChem under such
sublicense arrangement or (ii) ** of sublicensee's Net Sales; provided, however,
that in no event shall such royalty to OSI exceed ** of the sublicensee's Net
Sales.
4.4.2. Royalties - Analogues. BioChem shall pay OSI a royalty
at the rate of ** of the Net Sales by BioChem and its Affiliates of each Product
containing an Analogue. BioChem shall continue to pay such royalty on Net Sales
of each Analogue in each country (a) so long as the manufacture, use or sale of
which is covered by a valid claim under the Joint Patent Rights with respect to
such Analogue in such country or (b) if not covered by a valid claim under the
Joint Patent Rights, for 10 years from the date of first commercial sale of such
Analogue in each such country. If BioChem sublicenses its rights to an Analogue
under this Agreement to a third party, BioChem shall pay to OSI an amount equal
to the greater of (i) ** of the applicable royalty payment due to BioChem under
such sublicense arrangement or (ii) ** of the sublicensee's Net Sales; provided,
however, that in no event shall such royalty to OSI exceed ** of the
sublicensee's Net Sales.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 14
4.4.3. Patent Dates. Royalties shall be paid by BioChem on Net
Sales made by BioChem within 90 days after the end of each calendar quarter in
which such Net Sales are made. Such payments shall be accompanied by a statement
showing the Net Sales of each Product or Analogue in each country and a
calculation of the amount of royalty due. With respect to Net Sales made by
sublicensees, BioChem shall pay to OSI the amounts specified in Sections 4.4.1
and 4.4.2 within 30 days following receipt by BioChem of royalty payments due to
BioChem from its sublicensees.
4.4.4. Accounting. The Net Sales used for computing the
royalties payable to OSI by BioChem shall be computed and paid in U.S. Dollars.
For purposes of determining the amount of royalties due with respect to Net
Sales in any foreign currency, the amount shall be computed generally by
converting the foreign currency amount into U.S. Dollars using for each month's
calculation the foreign currency exchange rate on the last day of the preceding
month or such other method as is consistent with internal foreign currency
translation procedures of BioChem or the sublicensee paying the royalties, as
actually used by such party on a consistent basis in preparing its audited
financial statements.
4.4.5. Records. BioChem shall keep for three years from the
date of each payment of royalties complete and accurate records of Net Sales by
BioChem, its Affiliates and sublicensees of each Product in sufficient detail to
allow the accruing royalties to be determined accurately. OSI shall have the
right for a period of three years after receiving any report or statement with
respect to royalties due and payable to obtain at OSI's expense from the
independent certified public accountant used by BioChem for public reporting an
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<PAGE> 15
audit of the relevant records of BioChem to verify such report or statement.
BioChem shall make its records available for inspection by such independent
certified public accountant during regular business hours at such place or
places where such records are customarily kept, upon reasonable notice from OSI,
to the extent reasonably necessary to verify the accuracy of the reports and
payments. Such inspection right shall not be exercised more than once in any
calendar year nor more than once with respect to sales in any given period,
unless a subsequent inspection reveals discrepancies which may have also
occurred during such period. Such independent certified public accountant shall
report to OSI only as to the accuracy of the Net Sales computation and royalty
payments. OSI agrees to hold in strict confidence all information concerning
royalty payments and reports, and all information learned in the course of any
audit or inspection, except to the extent necessary for such party to reveal
such information in order to enforce its rights under this Agreement or
disclosure is required by law. The failure of OSI to request verification of any
report or statement during the three-year period shall be considered acceptance
of the accuracy of such report, and BioChem shall have no obligation to maintain
records pertaining to such report or statement beyond the three-year period. The
results of the inspection shall be binding on both parties.
4.4.6. Withholding Taxes. All amounts owing to OSI as
specified in this Agreement shall be paid net of all applicable taxes, fees, and
other charges excluding only taxes on the income of BioChem. BioChem will assist
OSI in minimizing the withholding tax applicable to any payment made by BioChem
hereunder and in claiming tax refunds at OSI's reasonable request.
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<PAGE> 16
ARTICLE V
HEPATITIS B VIRUS ("HBV") AND
HUMAN IMMUNODEFICIENCY VIRUS ("HIV")
5.1. LICENSE TO BIOCHEM. OSI hereby grants to BioChem a
royalty-free worldwide, irrevocable non-exclusive license in the Non-Exclusive
Field, including the right to grant sublicenses hereunder, under the Joint
Patent Rights and Joint Technology, to research, develop, make, have made, use,
sell, have sold and commercialize antiviral agents against HBV and HIV.
5.2. LICENSE TO OSI. BioChem hereby grants to OSI a
royalty-free worldwide, irrevocable non-exclusive license in the Non-Exclusive
Field, including the right to grant sublicenses hereunder, under the Joint
Patent Rights and Joint Technology, to research, develop, make, have made, use,
sell, have sold and commercialize antiviral agents against HBV and HIV.
ARTICLE VI
PATENT RIGHTS
6.1. JOINT PATENT RIGHTS RELATING TO THE EXCLUSIVE FIELD. BioChem shall
have the exclusive right, at its own expense, to take all necessary actions to
obtain, sustain and enforce patent protection for Joint Patent Rights relating
to the Exclusive Field, including the following:
(a) filing applications for patents on any patentable
inventions included within Joint Patent Rights relating to the Exclusive Field;
(b) prosecuting all pending and new patent applications
included with Joint Patent Rights relating to the Exclusive Field and responding
to opposition or any other form of
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<PAGE> 17
action for invalidity or revocation of patent rights filed by Independent Third
Parties against the grant of patents for such applications; and
(c) maintaining in force any patents included within Joint
Patent Rights relating to the Exclusive Field by duly filing all necessary
papers and paying any fees required by the patent laws of the particular country
in which such patents were granted.
OSI shall provide reasonable assistance to BioChem to achieve the
objectives of this Article. BioChem shall keep OSI informed as to all
developments with respect to Joint Patent Rights by copying OSI on all documents
and correspondence related to such protection and maintenance.
6.2. PATENT RIGHTS RELATING TO THE NON-EXCLUSIVE FIELD. Upon the
reasonable request of a Party, each Party agrees to provide assistance to the
other Party with respect to the filing of patent application(s) in or relating
to the Non-Exclusive Field.
ARTICLE VII
CONFIDENTIAL INFORMATION AND PUBLICATION
7.1. GENERAL. Each of BioChem and OSI recognizes that the other Party's
Confidential Information, BioChem Technology, OSI Technology, Joint Technology,
BioChem Patents, OSI Patents, Joint Patent Rights and the results of research
pursuant to the CRDC Agreement (collectively, the "Confidential Information")
constitute highly valuable proprietary confidential information.
7.2. TREATMENT OF CONFIDENTIAL INFORMATION.
7.2.1. Subject to the disclosure obligations set forth in this
Article, each of BioChem and OSI agree that, during the term of this Agreement
and for a period of 10
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years thereafter, each Party will maintain, and shall cause its Affiliates to
maintain, the Confidential Information in confidence and shall not disclose,
divulge or otherwise communicate such Confidential Information to Independent
Third Parties (except its own Confidential Information, its own Technology or
its own Patents). Notwithstanding any provision of this Agreement, BioChem and
OSI hereby agree that they shall, together with their Affiliates, be entitled to
use, outside of the Field, know how obtained during the term of this Agreement.
7.2.2. Each Party further agrees to exercise, and shall cause
its Affiliates to exercise, every reasonable precaution to prevent and restrain
the unauthorized disclosure of such Confidential Information by any of its
directors, officers, employees, consultants, subcontractors, sublicensees or
agents or those of its Affiliates.
7.3. PRESS RELEASES AND ANNOUNCEMENTS.
7.3.1. Neither OSI nor BioChem shall, and OSI and BioChem
shall cause their Affiliates not to, issue any press release or other public
announcement disclosing any Confidential Information (other than its own
Confidential Information, its own Technology or its own Patents) without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed, except where such announcements or press
releases are required by law for the purposes of securing the registration of,
and/or governmental approval to market, in accordance with this Agreement, any
Products, or for the procurement of patent protection of Joint Patent Rights.
Notwithstanding the foregoing, each Party shall have the right to disclose the
existence of this Agreement in any prospectus, offering memorandum or
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<PAGE> 19
other document or filing required by applicable securities laws or other
applicable law or regulation.
7.3.2. Where a press release or public announcement is
required by law, the Party required to disclose Confidential Information shall
inform the other Party and provide it with a copy of any such press release or
public announcement.
7.3.3. Each of BioChem and OSI shall inform the other Party of
any Confidential Information which it is required to disclose.
7.4. PUBLICATIONS. Notwithstanding the provisions of Sections 7.1, 7.2
and 7.3 hereof, any results arising from research pursuant to the CRDC Agreement
may be published, subject to the following applicable restrictions:
7.4.1. The Party intending to publish, directly or indirectly,
shall provide the other Party with a copy of the manuscript (including any
abstract) for any proposed publication or presentation no later than 30 days
prior to the submission of such proposed publication or presentation to a
journal, editor or other Independent Third Party for the purpose of review and
comment. The other Party shall have the right to comment on the authorship of
the publication or presentation and to request modifications of any manuscript
to be published or presented, if such manuscript will jeopardize a Patent Right,
patent, trade secret, or other proprietary right related to this Agreement. If
the Party intending to publish does not agree with the authorship or any
modifications, the Parties shall consult independent patent counsel satisfactory
to both Parties whose determination shall be final and binding on the Parties.
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<PAGE> 20
7.4.2. If the other Party informs the publishing Party within
30 days of receipt of an advance copy of a proposed publication that such
publication in its reasonable judgment could be expected to have material
adverse effect on Joint Patent Rights or Confidential Information, the
publishing Party shall delay or prevent such publication as proposed. In the
case of inventions, such Party shall delay or cause the author to delay
submission of the work for publication or other public disclosure for up to six
months after filing of a patent application.
ARTICLE VIII
AMENDMENT TO TECHNOLOGY TRANSFER AGREEMENT
8.1. The Technology Transfer Agreement is hereby amended as follows:
8.1.1. Article VI is hereby amended to delete the final
sentence of Section 6.2.
8.1.2. Article VII, Royalty, is hereby deleted in its
entirety.
8.2. The Technology Transfer Agreement, as amended hereby, shall remain
in full force and effect.
ARTICLE IX
NOTICES
9.1. All notices shall be taxed, or mailed via certified mail, return
receipt requested, or courier, addressed as follows, or to such other address as
may be designated from time to time:
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<PAGE> 21
If to OSI: At its address as set forth at the beginning of
this Agreement
Attn.: Colin Goddard, Ph.D., President &
Chief Executive Officer
Fax : 516-745-6429
If to BioChem: At its address as set forth at the beginning of
this Agreement
Attn.: VP Legal Affairs & Corporate Secretary
Fax : 450-978-7739
Notices shall be deemed given as of the date of receipt.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1. GOOD STANDING. Each of BioChem and OSI represents and warrants
that it is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and that it has all
requisite power and authority, corporate or otherwise, to conduct its business
as now being conducted, to own, lease and operate its properties and to execute,
deliver and perform this Agreement.
10.2. PROPER AUTHORIZATION. Each of BioChem and OSI represents and
warrants that the execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action and do not and will not
(a) require any consent or approval of each Party's stockholders, (b) violate
any provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to each
Party or any provision of its charter or by-laws or (c) result in a breach of or
constitute a default under any material agreement, mortgage, lease, license,
permit or other instrument or
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<PAGE> 22
obligation to which BioChem or OSI is a party or by which BioChem or OSI or
their respective properties may be bound or affected.
10.3. BINDING AGREEMENT. Each of BioChem and OSI represents and
warrants that this Agreement is a legal, valid and binding obligation of each
party, enforceable against the other in accordance with its terms and
conditions, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws, from time to
time in effect, affecting creditors' rights generally.
10.4. TITLE. Each of BioChem and OSI for itself represents that it has
good and marketable title to all of its properties, rights and assets to be used
in the fulfillment of its responsibilities under this Agreement, subject to no
claim of any third party.
ARTICLE XI
MISCELLANEOUS
11.1. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective legal representatives,
successors and permitted assigns.
11.2. HEADINGS. The headings contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement, and no
construction or inference shall be derived therefrom.
11.3. ENTIRE AGREEMENT. This Agreement and the documents and other
agreements referred to herein set forth the entire agreement and understanding
of the Parties.
11.4. SEVERABILITY. In the event that any provision of this Agreement
is held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any
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<PAGE> 23
law of any relevant jurisdiction, the validity of the remaining provisions shall
be construed and enforced as if the Agreement did not contain the particular
provisions held to be unenforceable.
11.5. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.6. AMENDMENT, WAIVER, ETC. This Agreement may be amended, modified,
superseded or canceled, and any of the terms hereof may be waived, only by a
written instrument executed by each party hereto or, in the case of waiver, by
the party or parties waiving compliance. The delay or failure of any party at
any time or times to require performance of any provision hereof shall in no
manner affect the rights at a later time to enforce the same. No waiver by any
party of any condition or of the breach of any term contained in this Agreement,
whether by conduct or otherwise, in any one or more instance, shall be deemed to
be, or construed as, a further or continuing waiver of any such condition or of
the breach of such term or any other term of this Agreement.
11.7. ASSIGNMENT AND SUCCESSORS. This Agreement and the rights and
interests hereunder may not be assigned by either party in whole or in part
except to an Affiliate, a purchaser of all or substantially all of the assets of
a party or to any successor corporation resulting from any merger or
consolidation of either party with or into such corporation.
11.8. GOVERNING LAW. This Agreement shall be construed and interpreted
in accordance with the laws of the State of New York.
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<PAGE> 24
11.9. DISPUTE RESOLUTION. In the event BioChem and OSI cannot agree on
any matter requiring agreement between the Parties, the matter of differences
shall be determined by arbitration. Arbitration shall be conducted under the
Commercial Arbitration Rules of the American Arbitration Association by one
person appointed by the Parties or, if the Parties cannot agree within 30 days
following notification by one Party that it wishes to refer a matter to
arbitration, by such person empowered by the American Arbitration Association to
so appoint an arbitrator. Arbitration shall take place in a location agreed to
by the Parties, or absent such agreement, chosen by the arbitrator. The decision
of the arbitrator shall be final and binding on both Parties. The fees and
expenses of the arbitrator shall be borne equally by the Parties.
11.10. INDEMNIFICATION. BioChem shall indemnify, defend and hold
harmless OSI, its officers and their respective successors, heirs and assigns
(the "Indemnitees") against any liability, damage, loss or expense (including
reasonable attorneys' fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any one of them in connection with any claims, suits,
actions, demands or judgments arising out of any infringement (including, but
not limited to, actions in the form of tort, warranty or strict liability)
arising out of any claim by a third party relating to the manufacture, use or
sale of a Product. Except as provided above, the parties agree that all
warranties, express or implied, are excluded.
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<PAGE> 25
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed as a sealed instrument in their names by their properly
and duly authorized representatives as of the date first written above.
BIOCHEM PHARMA INC.
By: /s/ Jacques LaPointe
----------------------------------
Name: Jacques LaPointe
Title: President and C.O.O.
By: /s/ Francois Lagault
----------------------------------
Name: Francois Lagault
Title: Executive Vice President
Corporate Development
OSI PHARMACEUTICALS, INC.
By: /s/ Colin Goddard
----------------------------------
Name: Colin Goddard
Title: President and CEO
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<PAGE> 26
EXHIBIT A
BIOCHEM PATENT RIGHTS
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
-25-
<PAGE> 27
EXHIBIT B
JOINT PATENT RIGHTS
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 28
EXHIBIT C
JOINT TECHNOLOGY
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 29
EXHIBIT D
LEAD COMPOUNDS
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 30
EXHIBIT E
OSI PATENT RIGHTS
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 31
EXHIBIT F
MATERIALS
1) As per Section 3.2, OSI to BioChem: **
2) As per Section 3.3, BioChem to OSI: **
3) As per Section 3.4, OSI to BioChem: **
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
-30-
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